When it comes to buying a home, one of the most important decisions you’ll make is choosing the right type of mortgage. But with so many options available, it can be overwhelming to understand the differences between them. Here’s a breakdown of some of the most common types of mortgages available to help you make an informed decision.

1. Fixed-Rate Mortgages: This type of mortgage has an interest rate that remains the same for the entire term of the loan, usually 15 or 30 years. This means that your monthly payments will remain the same, making it easier to budget for the long term. This is the most popular type of mortgage among homebuyers.
   
2. Adjustable-Rate Mortgages (ARMs): With an ARM, the interest rate changes over time. They usually have a fixed interest rate for a certain period of time, after which it can change annually. The most common ARMs are the 5/1, 7/1, and 10/1. The first number is the amount of years the rate is fixed (i.e. 10/1 means the rate is fixed for the first 10 years). The interest rate of an ARM is tied to an index, such as the Treasury rate, which can be beneficial if interest rates are low, but if rates go up, payments can become unaffordable.
   
3. FHA Loans: These loans are insured by the Federal Housing Administration (FHA) and they are available to those with lower credit scores and a small down payment. They are a popular choice among first-time homebuyers, but they require mortgage insurance.
   
4. VA Loans: These loans are backed by the Department of Veterans Affairs (VA) and they are available to veterans, active-duty military members, and eligible surviving spouses. They require no down payment and no mortgage insurance.
   
5. USDA Loans: These loans are backed by the United States Department of Agriculture (USDA) and they are available to those who want to buy a home in a rural area. They have no down payment and no mortgage insurance, but they do have income limits.
   
6. Jumbo Loans: These loans are for high-cost properties and they require a larger down payment than other types of mortgages. They also have stricter qualifications, such as a higher credit score and a larger income.

When it comes to choosing the right type of mortgage, it’s important to consider your financial situation, credit score, and long-term goals. Take the time to research different options and compare rates from multiple lenders. A mortgage broker can also be a great resource to help you navigate the different types of mortgages available.

In summary, understanding the different types of mortgages available is crucial for making an informed decision when buying a home. The most common types of mortgages include fixed-rate, adjustable-rate, FHA, VA, USDA, and Jumbo loans. Each type of mortgage has its own advantages and disadvantages, and it’s important to consider your financial situation, credit score, and long-term goals before making a decision. Don’t hesitate to ask for help from a mortgage broker to guide you through the process.

Work with Modern Lending

If you are looking into buying a home but don’t know where to start, look no further than Modern Lending! We have a team of professionals loan officers who are all extremely knowledgeable in their field and can help you secure the best line of credit possible. Reach out to us today for more information on how to get started! Verify my mortgage eligibility

Mike Fensterer | Sr. Loan Consultant NMLS 1666142

Contact via email @ mike.fensterer@modernteam.com